Self Guide Es Finance
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![Page 1: Self Guide Es Finance](https://reader036.fdocuments.in/reader036/viewer/2022081821/54956bfcac7959ff2d8b4e48/html5/thumbnails/1.jpg)
ENERGY STAR®
Money for Your Energy Upgrades
ENERGY STAR®
Money for Your Energy Upgrades
An Introduction to Financing Energy Efficiency Upgrades in
the Public Sector
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Today’s Discussion
• Paying for Energy Efficiency with Operating Budget Dollars
• Tax Exempt Lease-Purchase Agreements – the basics
• Performance Contracts – the basics • Delaying the installation is an
expen$ive decision
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Public Sector Defined
• Governments – State – County – Local/Municipal – Agencies
• Schools – K-12
• Higher Education – State Universities and Community Colleges – Private Colleges and Universities
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Private vs. Public Sector
• Approval Process • Financial Instruments
• Authorization to Commit 4
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Private vs. Public Sector
• Budget Savings • Maintenance Savings
• Environmental Improvements 5
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Public Sector Financing
Goals of Presentation: – Change traditional thinking
about energy financing in the public sector
– Accelerate the installation of energy-efficient equipment
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Public Sector Financing
Energy Optimization – Focuses on decreasing energy cost
while increasing productivity – Combines energy efficiency equipment
with operational procedures that can transform energy bills into “cash flow opportunities”
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Energy Management Strategy
These guidelines are the result of the “best practices” from top ENERGY STAR partners.
Put their expertise to work for your organization!
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“We are paying for energy efficiency
projects whether or not
we do the projects!”
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Public Sector Financing
So…
where does the money come from to pay for
energy efficiency projects?
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Accounting 101
Capital Budget (Debt)
• What is the approval process?
– Board/Council – Referendum
• Ceiling on capital expenses?
• Restructure capital expense budget?
Operating Budget (Expense)
• Already in utility payments
• Easier approval process • Energy efficiency
projects may provide access to captive funds for other needs
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Categorizing Financial Instruments
• Capital Expense – Bonds
• GO • Revenue
– Loans – “Performance
Contract”
• Operating Expense – Lease/Lease-
Purchase – “Performance
Contract”
• No Expense • Grants • Rebates/Incentives
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Categorizing Financial Instruments
• Capital Expense – Bonds
• GO • Revenue
– Loans – “Performance
Contract”
• Operating Expense – Lease/Lease-
Purchase – “Performance
Contract”
• No Expense • Grants • Rebates/Incentives
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Performance Contracts
Loans
LeasesPCs
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Performance Contracting
Market segment trends over time for ESCO projects
Source: National Association of Energy Service Companies
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What is an ESCO?
“An ESCO, or Energy Service Company, is a business that develops, installs, and
finances projects designed to improve the energy efficiency and maintenance costs for
facilities over a seven to 10 year time period. ESCOs generally act as project
developers for a wide range of tasks and assume the technical and performance risk
associated with the project.” www.naesco.org
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What Services Can An ESCo Provide?
• Walk-through energy audit • Comprehensive energy audit • Design and specification of new equipment • Vendor of energy efficiency equipment • Installation/construction management • Performance guarantees • Ongoing maintenance • Training of personnel • Measurement and verification of project performance • Financing • Indoor Air Quality problems • Procurement and purchase of energy commodity
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What Services Can An ESCo Provide?
• Walk-through energy audit� Comprehensive energy audit� Design and specification of new equipment� Vendor of energy efficiency equipment� Installation/construction management� Performance guarantees� Ongoing maintenance• Training of personnel • Measurement and verification of project performance • Financing • Indoor Air Quality problems • Procurement and purchase of energy commodity
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Common Performance Contracts
• Shared Savings Agreement • Fixed payment
• One-time verification • Taxable or tax-exempt
• Variable payment • Requires measuring and monitoring • More expensive
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Common Performance Contracts
• Guaranteed Savings Agreement – Can separate financing from technical
performance – Most commonly used for Public Sector
• Own-Operate – ESCo owns facility and sells back “output”
• “Chauffage” – Buy end-result, i.e., lumens or ambient
temperature
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Common Performance Contracts
Related but Independent Documents
– Project Development Agreement
– Energy Services Agreement
– Finance Agreement
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Private SectorPrivate Sector Financing
Loans
LeasesPCs
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Why Companies Ask for “Off Balance Sheet Financing”?“Off Balance Sheet Financing”?
• No Capital Budget for Energy Project – Freeze on Capital Spending – Competing with Other Projects
• Pay for Project from Operating Expenses – Cumbersome Capital Budget Process
• Restrictions on New Debt – Internal Restrictions – Over-leveraged – Covenants with Existing Lenders
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What Qualifies as “Off Balance Sheet Financing”?“Off Balance Sheet Financing”?
• Operating Leases
• True Performance Contracts
• Rental Agreements
• “Project Financings” – Large Projects
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Tax-Exempt Lease-Purchase Agreements
Tax-Exempt Lease-Purchase Agreements
(AKA Municipal Leases)
Loans
LeasesPCs
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Benefits of TaxTax--Exempt Exempt LeaseLease--Purchase AgreementsPurchase Agreements
• Title to the Equipment Rests with Lessee • Access to Low Cost, Tax-Exempt Funds • Payments may be Subject to Annual
Appropriation of Funds by Lessee • Accommodates Construction Financing • Payments in arrears • You may already be leasing something!
Fast and Easy!!!
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– Legal
Tax-Exempt Lease-Purchase
• Three Considerations – Legal
• Authority • Voter Approval Issues
– Financial Reporting • GAAP/GASB
– Internal Accounting • “Materiality”
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When Is 5% Not 5%?
Bond Lease
Plus Fees Fees Included
28
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An Incomplete Listing(for illustrative purposes only)
Tax-Exempt Lease-Purchase Financing by State
Few or no barriers
Check with advisorsSome legal issues
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Quantifying the cost of Delay
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Energy Efficiency: A Cash Flow OpportunityCash Flow Opportunity
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0Use existing data
A simplified general approach
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The Value of Your Investment
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The Value of Your Investment
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Cash Flow
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$1,042,136 $883,170
Cash Flow
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Cost of Delay
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Cost of Delay
2.2Break-Even Point
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15.4%Opportunity Cost if delayed 12 months*
Cost of Delay
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Reminder
An investment grade audit done by a qualified engineering
company will be required to determine the actual size of
your opportunity.
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How ENERGY STAR Can Help
• Peer Information
• Similar situations that met with success
• Impact of sharing the benefits
• Expert support with your financing process
• Assist with presentations to decisionmakers
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Internet Presentations
Distance Learning Opportunities – ENERGY STAR -Overview for Public Sector Organizations – Higher Education ENERGY STAR Overview – ENERGY STAR Overview for Service & Product Providers – Benchmarking with ES Portfolio Manager – Money for Your Energy Upgrades – Introduction to The CFO Calculator – Purchasing and Procurement – PC Power Management – Designing Top Energy Performing Building for Your Clients
To register, please visit ENERGY STAR Online Trainings and Presentations
www.energystar.gov
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Summary
• Significant cost savings are possible from energy efficiency projects
• Many projects are delayed or prevented due to financial concerns
• Third-party financing can provide funds for these projects
• Delaying projects is expensive • ENERGY STAR can help identify third party
financing that works for you
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For More Information...
• Neil Zobler (203) 790-4177 (Catalyst Financial Group, Inc.)
• Catalyst Financial Group, Inc. is an EPA contractor working for ENERGY STAR
• E-mail [email protected] • Call the ENERGY STAR Hotline at
1-888-STAR-YES (1-888-782-7937) • Visit www.energystar.gov